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January 24, 2007
Links Bankruptcy Venue Change to Recovery Rates
A recent study found that
creditors of companies filing for bankruptcy in
w:st='on'>New
York
w:st='on'>
size='3'>Delaware
much less than creditors of companies filing in other states, the
Wall Street Journal
reported today. 'The
creditors of firms which filed their cases in these two states were
expected to recover around 35 percent less than those of firms filing
their cases elsewhere,' said the study by Wei Wang, an assistant
professor of business at Queen's University in
w:st='on'>
size='3'>Kingston
w:st='on'>
size='3'>Ontario
study, which looked at 182 companies that filed for bankruptcy from 1995
to 2003, found that creditors of companies filing for bankruptcy
in
York recover 25 percent less than
their counterparts in
w:st='on'>
size='3'>Delaware
Wang said the research, which uses the trading prices of distressed debt
as a measure of creditors' recoveries, is the first to measure whether
the choice of bankruptcy court has an effect on the creditors' expected
recovery rate.
href='http://online.wsj.com/article/SB116961550859886124-search.html?KEYWORDS=bankruptcy&COLLECTION=wsjie/6month'>Read
more. (Registration required.)
href='http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID957307_code409694.pdf?abstractid=956949&mirid=1'>Click
here to read the study “Bankruptcy Filing and the Expected
Recovery of Corporate Debt.”
Airlines
id='2'>FLYi Wins Extension of Exclusivity Period
Bankrupt airline FLYi
Inc. will have until the end of April to solicit creditor support for
its reorganization plan, after a bankruptcy court approved its request
for an extension of the exclusivity period,
size='3'>Bankruptcy Law360 reported yesterday.
Judge Mary F.
Walrath of the U.S. Bankruptcy Court for the
District of Delaware granted FLYi’s request, noting that
“the debtors have articulated sufficient causes for approval of
the motion, and approval of the motion is in the best interests of the
debtors’ estates and creditors.” Judge Walrath gave the
company until April 30 to garner creditor support for its reorganization
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16932'>Read
more. (Registration required.)
id='3'>Northwest Files against
face='Times New Roman' size='3'>Union
size='3'>’s $1 Billion Claim
Northwest Airlines Inc.
has filed a motion against a $1 billion claim by a flight attendants
union, which alleges that Northwest broke their collective bargaining
agreement, Bankruptcy
Law360 reported yesterday. The Association of
Flight Attendants filed the $1 billion claim for five years of wages and
benefits allegedly lost as a result of a court-approved rejection of the
collective bargaining agreement. The approved agreement included a $195
million annual cut in pay and benefits. In its motion on Jan. 18,
Northwest said that there was no breach of contract, the Bankruptcy Code
doesn’t permit claims based on the rejection of a collective
bargaining agreement, and damages sought by AGA are too
speculative. Northwest’s original collective bargaining agreement
with its flight attendants was in effect from June 2000 to June
2005.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16989'>Read
more. (Registration required.)
id='4'>Delta CEO Says Airline Not in Merger Talks with
Northwest
Delta CEO Gerald Grinstein told
employees that the airline is not in merger talks with rival Northwest
Airlines Corp., Reuters reported yesterday. Grinstein's comments come
after reports of a possible merger between the two bankrupt airlines and
as Delta faces a hostile $9.8 billion takeover bid from rival US Airways
Group. “At the behest of our creditors' committee, we recently
retained an investment banker to obtain information from Northwest, a
far cry from negotiating for a merger with them,” Grinstein told
members of Delta Board Council, which represents about 40,000 employees,
href='http://www.nytimes.com/reuters/business/business-delta-northwest.html?pagewanted=print'>Read
more.
Autos
face='Times New Roman' size='3'>
id='5'>Delphi
Bloc Sign $3.4 Billion Equity Deal
Delphi Corp. said that it
had signed an agreement for an investment of up to $3.4 billion by a
bloc of funds that will take a controlling stake in the auto parts maker
as it emerges from bankruptcy, Reuters reported yesterday. The
bankruptcy court overseeing
face='Times New Roman' size='3'>Delphi
size='3'>'s reorganization approved the equity investment plan earlier
this month over the objections of hedge fund Highland Capital
Management, which offered a rival $4.7 billion reorganization
plan.
size='3'>Delphi
the Securities and Exchange Commission that it had signed the agreement
cleared by the court with investors led by Appaloosa Management LP and
Cerberus Capital Management last Thursday. Under the deal, the investors
will buy $1.2 billion of
size='3'>Delphi
stock and another $200 million in common stock under a rights offering
as the former subsidiary of General Motors Corp. emerges from
bankruptcy.
href='http://www.nytimes.com/reuters/business/business-delphi-investors.html?pagewanted=print'>Read
more.
id='6'>Tower Requests Lift from Automatic Stay in
w:st='on'>
size='3'>Delphi
size='3'>Case
Bankrupt Tower Automotive
Inc. on Monday asked the bankruptcy court to lift the automatic stay
against filing claims in the chapter 11 case of auto parts maker Delphi
Automotive Systems LLC, claiming it needs more time to file a
claim, Bankruptcy Law
360 reported yesterday. Tower and some of its
subsidiaries requested relief from the stay so that they can file
preferential transfer claims against
face='Times New Roman' size='3'>Delphi
size='3'>. The two companies have been disputing whether Tower, also an
auto parts supplier, has the right to submit a claim in
size='3'>Delphi
bankruptcy.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16934'>Read
more. (Registration required.)
Seek Millions in Silicon Graphics Case
Legal professionals have
asked a bankruptcy court for millions of dollars in compensation checks
for their work on Silicon Graphics’ bankruptcy case,
Bankruptcy Law360
reported yesterday. Weil Gotshal & Manges LLP, which
represented the Mountain View, Calif.-based company, asked the U.S.
Bankruptcy Court for the Southern District of New York this month for
more than $4 million in compensation for helping Silicon Graphics emerge
from bankruptcy in mid-October, just six months after filing for chapter
11. Winston & Strawn LLP also requested nearly $1.2 million in
compensation for its representation of the unsecured creditors’
committee.
href='http://bankruptcy.law360.com/Secure/ViewArticle.aspx?id=16872'>Read
more.
size='3'>(Registration required.)
id='8'>Lenders Offer New Financing Options as Mortgage Delinquencies
Mount
As the number of
borrowers falling behind on their mortgage payments climbs to the
highest level in five years, the mortgage industry is trying new
strategies to help bail them out, the Wall Street
Journal reported today. Bank of America Corp.
is allowing some borrowers with ARMs to refinance into a different loan
at no cost. Citigroup Inc.'s CitiMortgage unit is focusing extra
attention on parts of
size='3'>Florida
w:st='on'>
York, where home prices
have moved up sharply. It is also contacting delinquent borrowers within
days after a missed payment if it doesn't fit their normal bill-paying
habits. The rise in bad loans also is leading to a pick up in so-called
short sales, in which a lender allows the property to be sold for less
than the total amount due and often forgives the remaining debt.
href='http://online.wsj.com/article/SB116960676293885804.html?mod=home_whats_news_us'>Read
more. (Registration required.)
Farm to Pay 640 Katrina Claims
In a move that is
expected to jump-start rebuilding along the Mississippi Gulf Coast,
State Farm Insurance said yesterday that it had reached an agreement
with state officials to pay hundreds of millions of dollars to owners of
homes along the coast that were wrecked by Hurricane Katrina, the
New York Times
size='3'>reported today. The agreement settles lawsuits filed by 640
homeowners and allows thousands of others to reopen damage claims that
State Farm previously closed. Insurance executives said they expected
the outlines of the deal to be adopted by other carriers. The agreement
does not apply to
face='Times New Roman' size='3'>New
Orleans
of the levees left much of the city underwater for days. Lawyers and
insurers say no similar settlement talks are in progress there.
href='http://www.nytimes.com/2007/01/24/business/24insure.html?_r=1&oref=slogin&ref=business&pagewanted=print'>Read
more.
id='10'>Citigroup Loses Bid to End $10 Billion Parmalat
Suit
A
w:st='on'>
Jersey state court has
rejected Citigroup Inc.'s bid to dismiss a $10 billion lawsuit charging
that it helped former management at bankrupt Italian food company
Parmalat SpA commit fraud, Reuters reported yesterday. In his decision
on Monday, Bergen County Superior Court Judge Jonathan Harris rejected
Citigroup's argument that Parmalat, best known for its long-life milk,
brought the case in the wrong court. Parmalat Chief Executive Enrico
Bondi has accused some 50 defendants of helping prior management hide
debt and inflate results, leading to
face='Times New Roman' size='3'>Europe
size='3'>'s largest bankruptcy case in 2003. A Parmalat unit, Farmland
Dairies, had been located in
w:st='on'>
size='3'>Wallington
N.J.
size='3'> Citigroup had argued that
w:st='on'>
Jersey wasn't equipped to
deal with the case's complexity, didn't have key witnesses and
documents, and should not be forced to interpret Italian law.
href='http://www.nytimes.com/reuters/business/business-citigroup-parmalat.html?pagewanted=print'>Read
more.
id='11'>TROUBLED COMPANIES IN THE NEWS
1000’s of companies lose
money or experience some form of difficulty each
quarter.
The business news
articles below are taken from the
size='3'>Daily Summary of Troubled & Fast Growing U.S. Companies and
Other Business News published by Bastien
Financial Publications.
To begin receiving the COMPLETE
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face='Times New Roman' color='#0000ff'
size='3'>steve@creditnews.comyour
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size='3'>We’ll set you up within 24 hours.
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size='3'>Ahold NV's fraud headaches aren't
over yet, with federal regulators in the
w:st='on'>
size='3'>U.S.
another thirteen people with taking part in a large-scale accounting
fraud at Ahold's U.S Foodservice subsidiary in the
w:st='on'>
size='3'>U.S.
size='3'> Three years ago, the Securities and Exchange Commission
charged Ahold, the Netherlands-based supermarket operator and
foodservices giant, with overstating sales by billions of dollars and
reporting fake profits of hundreds of millions of dollars. All told,
about thirty individuals have been accused of participating in the
alleged scam.
size='3'>Career Education Corp.'s stock price
shot up 11% after the Department of Education lifted a ban on the
Estates
year and a half ago. The ban, coming from a financial audit of the
educational firm, limited its options for expanding and making
acquisitions. Career Education is still trying to overcome its
problems, which stemmed from charges that the firm was engaged in
cheating on admissions, financial aid and job
placement.
size='3'>Central Garden & Pet Co.'s stock
price fell 12% after the
w:st='on'>Walnut
Creek
garden and pet products announced that it anticipates reporting a loss
in its first quarter. Earlier, the company expected it would have
roughly breakeven results in the period.
size='3'>Gap Inc.'s CEO, Paul Pressler, is out
and the board will look for a replacement with more retail experience to
turn around the
face='Times New Roman' size='3'>San
Francisco
retailer. He came on board five years ago, and while succeeding in
reducing Gap's pile of debt, he also faced sliding sales. Mr. Pressler,
a former Walt Disney Co. executive, was unable to reverse the company's
sliding same-store sales, which have fallen monthly for most of the last
two years. The company is currently reviewing strategy at its Gap
and Old Navy chains as it attempts to regain their high-flying days of
the 1990s. The review also includes considering strategic alternatives,
such as putting the company up for sale.
size='3'>General Motors Corp. and
Ford Motor Co.
size='3'>'s preliminary talks with the United Auto Workers union took
another development, as parties involved mentioned the possibility of
shifting the financial responsibility for tens of billions of dollars of
retirees' healthcare liabilities to the union. A deal on that
cost-cutting matter is not at all certain. One major problem is
that it's unclear how the two
w:st='on'>
size='3'>U.S.
size='3'>automakers could come up with the cash needed to fund a
handover of the retiree obligations to a fund managed by the
union. Both carmakers are trying to restructure their North
American operations, to a great degree by cutting costs. It's
estimated that the Big Three automakers have to add $1,500 to the price
of each car they sell just to cover UAW healthcare
costs.
size='3'>InFocus Corp. saw one of its biggest
investors, Caxton Associates LLC of New Jersey, say that it will try to
boot out most of InFocus's board and replace them with new directors.
Caxton has a 10% stake in the Oregon-based maker of projectors. In
its first nine months of 2006, InFocus lost about $48.6 million on
revenue of $291 million.